The Narendra Modi government is hopeful that India will wade into the list of top 100 countries on World Bank’s Ease of Doing Business ranking 2018 after taking over “7,000” big and small steps in the past three-and-a-half years, most significant being the implementation of Goods and Services Tax (GST) and Insolvency and Bankruptcy Code (IBC). Before World Bank announces this year’s fresh rankings, we take a look at the factors that weighed down to keep India’s ranking last year to a disappointing 130 among 190 countries, and the factors which might be helping India improve this year.
The World Bank ranking is based on its study of the system in the two cities of Mumbai and New Delhi. The ease of doing business is an index created by the World Bank to measure regulations directly affecting businesses and overall environment. The rankings are based on ten parameters — starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.
For each parameter, the World Bank provides a rank, which put together decide the overall ranking of India. In 2016, the World Bank Ease of Doing Business ranking 2017, India made a significant jump of 25 ranks in “getting electricity parameter”, mainly due to “electricity for all” programme launched by Narendra Modi, but fared poorly on many other fronts.
India has been doing poorly on four major fronts — dealing with construction permits, paying taxes, starting a business and resolving insolvency — where it ranks below 100 in each. Besides, two other fronts — getting credit and protecting minority investors — where India usually ranks higher, also dropped a few notches last year. Together: starting a business, getting credit, and protecting minority investors are the three factors which pulled down India’s ranking. It was due to high jump in getting electricity and enforcing contract parameters because of which India ranking showed a growth, but only by one rank last year.
While 2017 has not been a good year for India despite Prime Minister Narendra Modi’s strong pitch for ‘Make In India’, 2018 ranking is likely to pull up India’s rank significantly on the fronts of paying taxes and resolving insolvency ranked 172 and 136, respectively as India not only adopted but implemented two major reforms the GST and IBC pertaining to these parameters. It is also likely that India will get better ranking on starting a business front as the government has announced eBiz, the investor-centric hub-and-spoke based online single window model for providing clearances and filing compliances.
India’s ranking in the ease of doing business is crucial for the Narendra Modi government as the Prime Minister had been pitching the country as an ideal place for starting businesses with initiatives like ‘Make In India’ and ‘minimum government, maximum governance’, and this ranking could be a mid-term confidence booster for the government.